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Tuesday, 13 September 2016

Wall Street gains as Fed officials temper rate hike expectations

U.S. stock indexes were higher on Monday after Federal Reserve Board Governor Lael Brainard stuck to her dovish stance on interest rates, saying the central bank must be cautious in removing monetary stimulus too quickly.

"Today's new normal counsels prudence in the removal of policy accommodation," said Brainard, a permanent voting member and the last official scheduled to speak before the quiet period ahead of the Fed's policy-setting meeting on Sept. 20-21.

The comments from Brainard followed those from Atlanta Fed Bank President Dennis Lockhart and his Minneapolis counterpart Neel Kashkari earlier where they suggested there was no urgency in raising rates.

Their views helped temper some jitters after recent comments from a host of other Fed officials, including Boston Fed President and long-time dove Eric Rosengren on Friday, expressed more confidence about raising rates.

The dollar index .DXY dropped 0.29 percent after Brainard's comments. Traders trimmed their odds for a September rate hike to 15 percent from 24 percent on Friday and for a December hike to 54.5 percent from 59.2 percent, according to the CME Group's FedWatch tool.

The rising expectations of a September rate hike had sent the three major U.S. stock indexes tumbling on Friday in their worst decline since the Brexit vote.

At 13:35 a.m. ET (1735 GMT), the Dow Jones Industrial Average .DJI was up 90.63 points, or 0.5 percent, at 18,176.08.

The S&P 500 .SPX was up 12.07 points, or 0.57 percent, at 2,139.88, and the Nasdaq Composite .IXIC was up 39.51 points, or 0.77 percent, at 5,165.41.

All 10 major S&P 500 sectors were higher. The smallest gain was among the financials .SPSY, which stand to benefit from higher rates.

Also providing a boost was Apple's 1.5 percent rise following two straight days of losses. The stock was also chiefly responsible for the S&P 500 technology index 1.17 percent gain.

Perrigo rose 5.7 percent after activist investor Starboard Value disclosed a stake in the drugmaker and said it must make immediate improvements to revive its stock. The stock was the top percentage gainer on the S&P.

Wal-Mart rose 1.8 percent to $71.57 after Cowen and Company raised its rating to "outperform" from "market perform".

Advancing issues outnumbered decliners on the NYSE by 1,557 to 1,416. On the Nasdaq, 1,494 issues rose and 1,277 fell.

The S&P 500 index showed no new 52-week highs and four new lows, while the Nasdaq recorded 18 new highs and 40 new lows.